Enhabit: Improved Regulatory Outlook, Discounted Valuation, and Offensive Capital Deployment Support Buy Rating and Higher $12 Target

In a report released today, A.J. Rice from UBS upgraded Enhabit, Inc to a Buy, with a price target of $12.00.

A.J. Rice has given his Buy rating due to a combination of factors tied to improved regulatory visibility and attractive valuation. The final home health rule significantly reduced the magnitude of the anticipated reimbursement cut, which meaningfully lessens the pressure on Enhabit’s future earnings and lowers the expected drag on adjusted EBITDA. Management believes the way CMS structured this rule suggests that the large, permanent rate adjustment is essentially behind the industry, creating a path for potential positive rate updates starting in 2027. With this backdrop, Enhabit still expects to deliver mid‑single‑digit to high‑single‑digit adjusted EBITDA growth in 2026, even after incorporating the modest 1.3% rate reduction, supported by ongoing efficiency initiatives in SG&A and operating metrics.

At the same time, Rice highlights that Enhabit’s shares trade at a discounted multiple of next‑twelve‑month EV/EBITDA, which, combined with the improved earnings outlook, provides an appealing risk‑reward profile. The company’s strengthened position enables a more proactive capital allocation strategy, including stepped‑up investment in new home health and hospice locations and a targeted pipeline of bolt‑on acquisitions to enhance growth. This more “offensive” stance on capital deployment is supported by a balance sheet that can accommodate both organic and inorganic expansion. Reflecting higher earnings forecasts stemming from the favorable final rule and management’s initial 2026 guidance, Rice raises his price target to $12, reinforcing the Buy recommendation.